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17/12/24
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NZD/USD Steady Ahead of Fed Rate Cut: Market Braces for Economic Forecasts
The NZD/USD exchange rate remains stable as traders prepare for a likely interest rate cut from the US Federal Reserve (Fed) on Wednesday. Focus is primarily on the Fed’s economic forecasts for 2025. During Asian trading hours on Tuesday, the NZD/USD pair is positioned around 0.5780.
Market expectations indicate a nearly certain 25 basis point cut at the Fed’s December meeting, as reflected by the CME FedWatch tool. Traders are keenly anticipating comments from the Fed Chair and the Summary of Economic Projections following the policy meeting, which could provide further insights into future monetary policy directions.
Support for the NZD/USD pair is slight, as the US Dollar has been under pressure for three consecutive sessions due to cautious market sentiment leading up to the Fed’s announcement. The US Dollar Index, which evaluates the performance of the dollar against six major currencies, is around 106.70.
Recent data reveal some trends in the US economy: the preliminary S&P Global Composite Purchasing Managers Index (PMI) increased to 56.6 in December from the prior reading of 54.9. The Services PMI saw a rise to 58.5, while the Manufacturing PMI fell to 48.3, down from 49.7 previously.
In New Zealand, caution prevails as the release of Q3 Gross Domestic Product (GDP) data approaches, anticipated on Thursday. The economy is expected to shrink by 0.4% quarter-on-quarter, raising concerns about a potential return to recession.
Compounding these worries, China’s retail sales data for November showed a surprising slowdown, growing by only 3.0% year-on-year compared to an anticipated 4.6% and a previous month’s increase of 4.8%. This disappointing data dampens market sentiment towards New Zealand’s economy, which is closely tied to its trading partner.
On the domestic front, a report released on Monday indicated that the Business NZ Performance of Services Index rose to 49.5 in November, up from 46.2 in October, marking the highest level since February. Furthermore, the Food Price Index reflected a 1.3% year-on-year increase in November, slightly surpassing the previous month’s 1.2% rise.
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